Forward exchange contract designated as a fair value hedge of a foreign-currency-denominated firm commitment to purchase equipment, strengthening \$US On November 5, 2018, our company enters into a firm commitment to purchase equipment for delivery on March 20, 2019, in Euros (). The price of the equipment is fixed at 600,000 with payment due on delivery. We are concerned that the $US may weaken vis--vis the Euro and, on the same date, we enter into a foreign currency forward contract with a foreign currency broker to buy 600,000 on March 20, 2019. We will pay \$1.39 per 1, which is the current forward rate for settlement on March 20,2019. We designate the foreign currency forward contract as a fair value hedge of our risk of changes in the fair value of the firm commitment resulting from changes in the $/ exchange rate. Our company's functional currency is the $US. The relevant spot and forward exchange rates during this time period are as follows: a For settlement on March 20, 2019 b We ignore discounting in the computation of fair values. a. Prepare the journal entries to record the purchase and all adjustments required for the firm commitment, forward contract, and equipment purchase at November 5, 2018, December 31, 2018, and March 20, 2019. Note: If no entry is required, select "No entry" as your answers under Description and leave the debit and credit answers blank (zero). Hedged Transaction FV Hedge b. Reconcile to the forward rate at the forward contract's inception the net cash paid for both the equipment purchase and the settlement of the forward-contract derivative. Note: Do not use a negative sign with your answer. Net cash paid for equipment purchase and settlement of the forward contract derivative is: $ Forward exchange contract designated as a fair value hedge of a foreign-currency-denominated firm commitment to purchase equipment, strengthening \$US On November 5, 2018, our company enters into a firm commitment to purchase equipment for delivery on March 20, 2019, in Euros (). The price of the equipment is fixed at 600,000 with payment due on delivery. We are concerned that the $US may weaken vis--vis the Euro and, on the same date, we enter into a foreign currency forward contract with a foreign currency broker to buy 600,000 on March 20, 2019. We will pay \$1.39 per 1, which is the current forward rate for settlement on March 20,2019. We designate the foreign currency forward contract as a fair value hedge of our risk of changes in the fair value of the firm commitment resulting from changes in the $/ exchange rate. Our company's functional currency is the $US. The relevant spot and forward exchange rates during this time period are as follows: a For settlement on March 20, 2019 b We ignore discounting in the computation of fair values. a. Prepare the journal entries to record the purchase and all adjustments required for the firm commitment, forward contract, and equipment purchase at November 5, 2018, December 31, 2018, and March 20, 2019. Note: If no entry is required, select "No entry" as your answers under Description and leave the debit and credit answers blank (zero). Hedged Transaction FV Hedge b. Reconcile to the forward rate at the forward contract's inception the net cash paid for both the equipment purchase and the settlement of the forward-contract derivative. Note: Do not use a negative sign with your answer. Net cash paid for equipment purchase and settlement of the forward contract derivative is: $
